UK government to vet M&A deals, citing ‘national security’ as its prime concern

• UK government now requires advance notice of investment proposals
• It could intervene and kill deals deemed a potential threat to security
• Telecoms, IT and AI in the spotlight  

Not content with having interfered with the 5G infrastructure plans of the UK’s mobile operators, UK Prime Minister Boris Johnson has decided the government will vet M&A deals in the tech sector (as well as others) to make sure no unwelcome guests slip uninvited into the UK’s fragile economy and threaten the future of Great Britain. 

The Johnson administration is doing this by introducing the National Security and Investment Bill, which will “strengthen the UK’s ability to investigate and intervene in mergers, acquisitions and other types of deals that could threaten our national security,” including deals related to the telecoms, IT and AI sectors. 

It noted: “Under the National Security and Investment Bill, the government will be taking a targeted, proportionate approach to ensure it can scrutinise, impose conditions on or, as a last resort, block a deal in any sector where there is an unacceptable risk to national security.”

And acting as if it intended to stoke fear and paranoia, which we’re sure it didn’t, the government added: “This will mean that no deal which could threaten the safety of the British people goes unchecked, and will ensure vulnerable businesses are not successfully targeted by potential investors seeking to cause them harm.”

Quite what constitutes such a threat remains open to interpretation, though the Johnson administration assures the whole of the UK that decisions related to the Bill will be “targeted and proportionate.” Well, that’s OK then.

The announcement about the Bill notes that the “new regime will apply to investors from any country,” but it doesn’t take a genius to figure out that the main target of this new law is China, particularly following the decision by the UK government earlier this year to ban Huawei from involvement in the UK’s 5G and (almost certainly) fixed fiber broadband network rollouts. (See UK gives Huawei 5G the order of the boot (for now).)

And the government did its best to downplay any delays in deals or mass interference in the wheels of industry, which are already set to take a hammering from Brexit as well as the current pandemic: “Most transactions will be cleared without any intervention and foreign direct investment projects can continue to boost jobs and stimulate the economy across the UK, while ensuring the UK remains an attractive place to invest,” it noted.

The Bill makes it a legal requirement for investors and businesses to inform the UK government, via a digital portal, about “proposed deals in a limited number of sensitive sectors.” 

The UK government says “limited” but then identifies 17 sectors that fall either in part, or in their entirety, under this Bill, including: 

• Communications
• Data Infrastructure
• Artificial Intelligence
• Autonomous Robotics
• Computing Hardware
• Cryptographic Authentication
• Quantum Technologies
• Critical Suppliers to Government
• Critical Suppliers to the Emergency Services
• Satellite and Space Technologies

It might have been easier to list the sectors that will not be scrutinized…

The Johnson administration also attempted to justify the move by noting it wasn’t alone in such a move: “The UK is not alone in making such changes to its regime, which means global investors will be familiar with our approach. Like us, earlier this year the United States introduced mandatory notification requirements for transactions concerning specified types of businesses as part of a broader programme for reform. The Australian Government introduced legislation to their Parliament requiring foreign investors to seek approval to acquire a direct interest in sensitive national security businesses. And, like us, several other major recipients of investment, including France and Italy, have regimes that make certain transactions which take place without prior approval legally void.”

The full announcement can be read here: Gird your loins before you do...

- Ray Le Maistre, Editorial Director, TelecomTV